Directors of American Medical International on Monday rejected a buyout proposal from a Chicago-based health care conglomerate, saying the $1.74-billion cash offer is not in the best interests of AMI shareholders.
"Our board believes this clearly is not the time to pursue a sale of the company," said Walter L. Weisman, president and chief executive of Beverly Hills-based AMI.
The action came a week after Chicago-based Alpha Health Systems, a wholly owned subsidiary of Pesch & Co. of Chicago, offered $20 a share for AMI's 86.9 million shares.
LeRoy A. Pesch, a physician who controls the Chicago companies and who twice failed last week to make good on promises to publicly disclose the source of his financing for the AMI offer, said through a spokesman on Monday that he was withholding comment until he received official notification from AMI.
Pesch's offer for the nation's second-largest hospital management company was to have remained open until next Tuesday. But AMI rejected the offer in surprisingly quick and decisive fashion, analysts said.
AMI "wanted to send a message out to the world that they are not going to be taken over," said Randall Huyser, an analyst for Montgomery Securities in San Francisco. "It helps morale and helps protect them (AMI) from a potentially disruptive business situation."
In addition to its health care operations, Pesch & Co. has interests in information systems and real estate. It owns or manages 90 hospitals, largely as a result of its August acquisition of Republic Health of Dallas for $406.2 million.
AMI, which reported its first annual loss in 1986, has been the subject of takeover rumors for more than a year. Earlier this year, Universal Health Services, which held a 4% stake in AMI, approached the company about a friendly takeover but was rebuffed.
Subsequently, Pesch & Co. acquired 1 million of AMI's outstanding shares and made its own overture for the hospital chain.
Analysts said from the start that Pesch was fighting an uphill battle.
Kenneth S. Abramowitz, a health care analyst with Sanford C. Bernstein & Co., predicted last week that lenders would balk at giving Pesch financing because of the more than $1 billion in debt taken on to acquire Republic.
Other analysts said that Pesch was unable to enlist the support of AMI's biggest shareholder--the Bass family of Fort Worth, Tex., which controls 11.4% of AMI's shares. The Basses, however, have declined to say whether they supported Pesch's offer.
AMI officials declined to comment beyond Weisman's statement.